📝 BoJ Has Time to Review Macroeconomic Data: ING

Japan's real GDP grew by 0.4% quarter-on-quarter seasonally adjusted (vs a revised -0.1% in the fourth quarter, a 0.2% market consensus, and 0.4% INGf') in the first quarter.

The upside surprise came from the unexpected rise in business spending, which rose 0.9% (vs -0.7% in 4Q22). Forward-looking machinery orders data suggest that strong service sector orders offset sluggish manufacturing orders.

The Bank of Japan will be very patient in taking any action on the policy rates, and we still think that rate hikes will not come until next year after the BoJ makes some progress in the policy review, announced last month.

June may be too soon for the BoJ's YCC policy adjustment, but we believe that the YCC policy should be normalized soon because it has distorted the functioning of financial markets beyond supporting the economy. Since April, when the new fiscal year began, if higher-than-usual wage growth persists and supports consumer spending, and if the financial market jitters surrounding the US banking sector calm down, we think the BoJ will make a decision on YCC policy sooner rather than later. - ING